Acquisitions

9 Months Ended

Sep. 30, 2020

Acquisition of Three Shores Bancorporation, Inc.

On July 1, 2020, United completed the acquisition of Three Shores Bancorporation, Inc. (“Three Shores”), including its wholly-owned subsidiary, Seaside National Bank & Trust (“Seaside”), headquartered in Orlando, Florida. Seaside operated a 14-branch network located in key Florida metropolitan markets. In connection with the acquisition, United acquired $2.13 billion of assets and assumed $1.99 billion of liabilities. Under the terms of the merger agreement, Three Shores shareholders received $188 million in total consideration, of which $164 million was United common stock and $24.1 million was cash. United issued 8.13 million shares of common stock to Three Shores shareholders in the acquisition. The fair value of consideration paid exceeded the fair value of the identifiable assets and liabilities acquired and resulted in the establishment of goodwill in the amount of $41.6 million, representing the intangible value of Three Shores’ business and reputation within the markets it served. None of the goodwill is expected to be deductible for income tax purposes. United will amortize the related core deposit intangible of $3.36 million using the sum-of-the-years-digits method over 10 years, which represents the expected useful life of the asset.

United’s operating results for the three and nine months ended September 30, 2020 include the operating results of the acquired business for the period subsequent to the acquisition date of July 1, 2020.

The purchased assets and assumed liabilities were recorded at their acquisition date fair values and are summarized in the table below (in thousands).


	As Recorded by Three Shores		Fair Value Adjustments (1)		As Recorded by United
Assets
Cash and cash equivalents	$	218,714	$	—	$	218,714
Debt securities	374,237		7,503		381,740
Loans, net	1,463,567		(35,601)		1,427,966

Premises and equipment, net	1,892		(308)		1,584
Accrued interest receivable	8,849		(1,284)		7,565
Derivative assets	12,165		(365)		11,800
Net deferred tax asset	3,837		11,224		15,061
Core deposit intangible	—		3,360		3,360
Other assets	71,984		(6,644)		65,340
Total assets acquired	$	2,155,245	$	(22,115)	$	2,133,130
Liabilities
Deposits	$	1,796,739	$	5,955	$	1,802,694
FHLB advances and long-term debt	136,000		8,121		144,121
Derivative liabilities	12,165		—		12,165
Other liabilities	30,857		(2,811)		28,046
Total liabilities assumed	1,975,761		11,265		1,987,026
Excess of assets acquired over liabilities assumed	$	179,484
Aggregate fair value adjustments			$	(33,380)
Total identifiable net assets					146,104
Consideration transferred
Cash consideration transferred					24,108
Common stock issued (8,130,633 shares)					163,589
Total fair value of consideration transferred					187,697
Goodwill					$	41,593

(1) Fair values are preliminary and are subject to refinement for a period not to exceed one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

The following table presents additional information related to the acquired loan portfolio at the acquisition date (in thousands).


	July 1, 2020
PCD loans:
Par value	$	283,137
ACL at acquisition	(11,152)
Non-credit discount	(8,694)
Purchase price	$	263,291

Non-PCD loans:
Fair value	$	1,164,675
Gross contractual amounts receivable	1,358,793
Estimate of contractual cash flows not expected to be collected	76,503

Pro forma information

The following table discloses the impact of the acquisitions of Three Shores and First Madison Bank & Trust (“FMBT”), which United acquired on May 1, 2019, since the respective acquisition dates through September 30 in the year of acquisition. The table also presents certain pro forma information as if Three Shores and FMBT had been acquired on January 1, 2019 and January 1, 2018, respectively. These results combine the historical results of the acquired entity with United’s consolidated statement of income. Adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity; however pro forma financial results presented are not necessarily indicative of what would have occurred had the acquisitions taken place in earlier years.

Merger-related costs from the Three Shores acquisition of $3.36 million and $3.86 million, respectively, have been excluded from the three and nine months ended September 30, 2020 pro forma information presented below and included in the three and nine months ended September 30, 2019 pro forma information presented below. Merger-related costs from the FMBT acquisition of $756,000 and $1.78 million, respectively, have been excluded from the three and nine months ended September 30, 2019 pro forma information presented below. The actual results and pro forma information were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	Revenue		Net Income (Loss)		Revenue		Net Income (Loss)
2020
Actual Three Shores results included in statement of income since acquisition date	$	7,486	$	(129)	$	7,486	$	(129)
Supplemental consolidated pro forma as if Three Shores had been acquired January 1, 2019	152,257		47,827		418,950		112,103

2019
Actual FMBT results included in statement of income since acquisition date	$	2,697	$	1,403	$	5,024	$	2,590
Supplemental consolidated pro forma as if Three Shores had been acquired on January 1, 2019 and FMBT had been acquired January 1, 2018	163,430		53,118		473,556		153,675